Great Britain and The Trades From Cadiz and Lisbon To Spanish Americ and Brazil, 1759-1783

Great Britain and the Trades from Cadiz and Lisbon to Spanish America and Brazil, 1759-
1783
Author(s): Allan Christelow
Source: The Hispanic American Historical Review, Vol. 27, No. 1 (Feb., 1947), pp. 2-29
Published by: Duke University Press
Stable URL: http://www.jstor.org/stable/2508589
Accessed: 16-11-2017 01:41 UTC
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GREAT BRITAIN AND THE TRADES FROM CADIZ
AND LISBON TO SPANISH AMERICA
AND BRAZIL, 1759-1783
In this paper I propose to discuss British interest in trade

between Cadiz and the Spanish Indies and between Lisbon and
Brazil as it was about 1759, and to proceed to a consideration of
changes which affected that interest in the following twenty years
and to an assessment of the significance of such changes. The
two trades will be considered together because they were linked in
the commercial practice of the time and were affected simul-
taneously by developments which were very similar, although
not necessarily of common origin.
The peculiar characteristics of the Hapsburg organization of

trade between Spain and Spanish Indies are well known. It was
marked by three things: first, it limited trade to the ports of Cadiz
and Seville and to half a dozen ports on the Spanish Main and in the
West Indies; secondly, it restricted imperial commerce to meticu-
lously organized flotas sailing at stipulated intervals over pre-
scribed routes; and thirdly, it prohibited any share in the trade
to foreigners and even proscribed the carriage of any goods of
non-Spanish origin to the Indies.' In its essentials this system
continued into the days of the Bourbons, although it was modified
from time to time by the existence of the British South Sea
Company, the permission of occasional voyages by single ships to
Buenos Aires, Santiago de Chile, and Callao, and the establish-
ment of a regular system of mailboats (despachos) from the Main
and the islands to La Corufia. Later, between 1735 and 1754
the flotas were temporarily abolished and single ships were
eligible for voyages between permitted ports.
Although intermittent attempts were made to enforce them,
the laws excluding foreigners and foreign-produced goods from
the Indies trade often appeared to be more honored in the breach
than in the observance. The French, the British, the Dutch, and
most of the other European nations had heavy investments in
1 Cf. Clarence H. Haring, Trade and Navigation between Spain and the Indies in the Time
of the Hapsburgs (Cambridge, 1918).
GREAT BRITAIN AND THE TRADES 3
almost every flota that sailed, and, as a necessary corollary, drew

a lion's share of the returns from the Americas. Usually the
foreign interest was greater than that of native Spaniards and the
foreign factories in Cadiz were in a position to relish Pufendorff's
gibe that "Spain kept the cow and the rest of Europe drank
the milk."
Foreigners used several methods of sharing in the profits (and
losses) of the Cadiz trade. They imported goods from abroad or
bought Spanish produce and shipped to the Indies through
"cover-men," who as Spanish nationals signed the documents
that disguised foreign-owned shipments on the flotas and took
initial delivery of any returns. This system was so well establish-
ed that the Spanish government is said sometimes to have taken
punitive action against "cover-men" who absconded.2 Alter-
natively, foreign merchants in Cadiz might advance either money
or credit to Spanish nationals for the latter to invest in Indies
shipments. Or they might take their profits more easily by
selling their goods to Spaniards or other nationalities in Cadiz
against cash or short-term credit, leaving the burden of re-export
to their customer.3
It is rarely clear whether contemporary estimates of the size
of foreign interest in the flotas are in terms of shipments on behalf
of the merchants of a given nation or in terms of shipments broken
down by countries of origin. Whatever the criteria, however, all
such estimates agree that the French held the lead until the
eighteenth century, when they began to lose ground to the
British. Thus an estimate of 1691 gave the British share as less
than half the French and inferior in value to the Dutch and
Genoese,4 while an analysis of 1761 gave the French an average
share of ?1,250,000 and the British of ?1,090,000.5 The French
admitted ftht these nronorfions were ri%'ht for the time.6 while
2 Consul Puyabry to Praslin, July 24, 1764, in Archives Nationales, Paris (hereinafter
cited as A.N.), Affaires 6trang6res B 1, 277.
3 M6moire en forme de lettre, in Bibliotheque Nationale, Paris (hereinafter cited as
B.N.), Fonds frangais, 10,767, ff. 150-227; M6moire sur le commerce, March 16, 1761, in
Archives des Affaires Etrangeres, Paris (hereinafter cited as A.A.Th), Correspondence
politique, Espagne, 531, if. 364-385; Ossun to Squillace, September 11, 1763, in ibid., 539,
ff. 191-192.
4 H. See, "Documents sur le commerce de Cadiz, 1691-1752," Revue de Vhistoire des
coloniesfrangaises, XIX, No. 4 (1926), 465-520.
6 Additional manuscripts, British Museum (hereinafter cited as Add. MSS),36,807,f.246.
6 M6moire pour servir de reforme au commerce, in B.N., Fonds frangais, 10,768, ff.
372-384; Etat g6neral de tout ce que les nations 6trang6res fournissent A l'Espagne, in
ibid., f. 489.
4 THE HISPANIC AMERICAN HISTORICAL REVIEW
French and British sources agree that it was easy to over-estimate

the French share because by the mid-eighteenth century many
French merchants in Cadiz were merely commission agents for
other nations. 7 The Spanish share was inferior to both the British
and the French.
Mutatis mutandis, the legal status and the theoretical basis of
the Lisbon-Brazil trade were very similar to that of the Cadiz
trade. There was, however, one important difference-while the
latter was specifically forbidden to all foreigners the former was
open to the British by treaty. In 1654 as the price of British
support the infant House of Braganza had agreed that the
British might:
trade and traffic freely and safely from Portugal to the Brazils and other
conquests in the West Indies; and from the Brazils and the said con-
quests to Portugal, in all sorts of goods and merchandise whatsoever
(except meal, fish oil and Brazil wood . . . ). It is understood that the
English ships . .. are to sail in company with the Portuguese fleet.8
A little later the Portuguese agreed that British factors might

reside in Baia, Pernambuco, and Rio, a privilege which was, in
fact, but rarely exercised.9 As a result of such privileges the
British long dominated the Brazil trade, but the French and the
Dutch usually had worthwhile interests in the frotas.10 The
Portuguese interest was so small that the British minister Hay
remarked that "for the most part the Portuguese in the Brazil
trade have been but commissaries for other people.""1
By the middle of the eighteenth century many British mer-
chants regarded the Cadiz and Lisbon trades not as two wholly
separate trades but rather as a single complex. Many of them
traded and maintained agents in both places. Moreover, perhaps
a majority of shipments went forward from Britain "on consign-
ment"; that is, they were not shipped against specific orders but
were sent forward in the expectation that a good market might be
7 De Visme to Shelburne, March 23, 1767, in Public Record Office, State Papers Foreign
(hereinafter cited as S.P.F.), Spain, 94/175; Ossun to Squillace, September 11, 1763, in
A.A.?., 539, ff. 191-192.
8'Article XI of the Anglo-Portuguese treaty of July 10, 1654.
9 Article XIII of the Anglo-Portuguese treaty of June 23, 1661. See also The Privileges
of an Englishman in the Kingdom and Dominion of Portugal (London, 1759).
10 M6moire sur le commerce de Portugal, in B.N., Fonds frangais, 10,768, if. 527-528;
Note ... sur diff6rentes articles du commerce de France en Portugal, in ibid., ff. 529-532;
Note sur le royaume de Portugal, in ibid., 10,767, if. 352-373.
"Hay to Egremont, March 18, 1763, in S.P.F., Portugal, 89/58.
found in any one of several places. There was an efficient in-

telligence service in Lisbon which reported market prospects in
the whole of the Mediterranean area and relayed the latest news
from the Indies and Brazil, thus enabling merchants to switch
cargoes to the most profitable market of the moment.12 An
illustration of a different aspect of interdependence was offered
by the considerable amounts of British trade with the Viceroyalty
of La Plata which went via Lisbon and Brazil. As the British
merchants put it:
a trade commenced between the Portuguese and the Spaniards on the

Rio de Plata . .. and was carried on and encouraged by the cheapness
with which the Spaniards were supplied with English goods sent from
Lisbon in the Rio de Janeiro fleets, and from thence transported by sea
to Nova Colonia do Sacramento, whither the Spaniards resorted to
purchase these goods which were paid for in dollars returned to Lisbon
by the Rio fleet, the greatest part of which may be said to centre in
England. The latter years of the Spanish war the importance of this
trade began to show itself by the large sums of silver brought to Europe
by the Brazil fleets and had the war lasted a few years longer we should
by this inlet have supplied with English goods the greater part of the
Spanish settlements in America.3
Minister Hay confirmed the value of the returns, for in June

1761, he reported:
Besides the 10,000,000 cruzadas [sic] in gold brought back by the
Rio fleet (which arrived in Lisbon 25 June) there are 4,000,000 cruzadas
in silver, the produce of the trade at Nova Colonia in the river of Plate.
This silver the government has ordered to be conveyed with the great-
est secrecy not to give umbrage to the court of Spain.'4
The interlocking of her Brazil and Indies trades meant that from
Britain's point of view such contraband was not essentially
competitive with the occasional trade from Cadiz to Buenos
Aires."5
For the most part contemporary observers ascribed the pre-
dominance of the British in the Cadiz and Lisbon trades to
advantages which the latter were believed to enjoy as direct and
indirect resul-ts of favorable treaties with the Spanish and Por-
12 Hay to Halifax, May 24, 1764, in ibid., 89/59.
13 Memorials of the British Consul and Factories at Lisbon to His Majesty's Ambassador at
That Court and to His Secretaries of State of This Kingdom (London, 1766), pp. 89-90.
14 Hay to Pitt, June 29, 1761, in S. P. F., Portugal, 89/54.
15 Hay to Conway, March 1, 1766, in ibid., 89/62.
tuguese.'6 The majority of the clauses of these treaties"7 merely

guaranteed to the British merchants rights and facilities which
they ought to have enjoyed as a matter of common decency; but
the fact which impressed most people who examined the treaties
was that they established conditions that enabled British mer-
chants to place their goods ashore in Spain and Portugal at duty-
paid landed costs which were substantially lower than those of
their competitors for equivalent articles. A lower f.a.s. price in
Lisbon or Cadiz meant a lower landed cost in Brazil or the Spanish
Indies and this meant that British goods were either sold to the
final consumer at lower prices or that they earned higher profits
than similar goods of non-British origin.'8 Moreover, various
articles of the Anglo-Spanish and Anglo-Portuguese treaties not
only established very favorable rates for British goods but made
it a breach of treaty for the Spanish or Portuguese governments to
increase those rates. As statesmen of the period were partial to
increases in tariffs for increasing their revenues this was no small
advantage, for it meant that even when their production costs or
ocean freight charges were higher the British could often sell
their goods in Spain or Portugal or re-export to Brazil and the
Indies at prices lower than those of their competitors.
In addition, the treaties enabled the British to export from
Spain and Portugal unlicensed gold and silver coin and bullion,
even though such exports were specifically forbidden both by the
Anglo-Spanish and the Anglo-Portuguese treaties. It was true
that such prohibitions could not be enforced, for: "It is impossible
for the Portuguese and Spaniards to carry on their trade unless
they are allowed to pay the balance which is always against them
and can only be discharged in payments of that kind" [i.e., specie
or coin].19
16 Allan Christelow, "The Economic Background of the Anglo-Spanish War of 1762,"
Journal of Modern History, XVII (March, 1946), 22-36; Etat des objets qui exigent un
arrangement, in B.N., Fonds frangais, 10,768, ,f. 1-22; R6flexions reserv6es pour le minis-
tere de la France, in ibid., 10,769, ff. 71-76.
17 The Anglo-Spanish treaties of 1667, 1670, 1713, 1715, and 1750 and the Anglo-Portu-
guese treaties of 1642, 1654, 1661, and 1703 are printed in Sir E. Hertslet, Complete Collec-
tion of the Treaties at Present Subsisting between Great Britain and Foreign Powers So Far As
They Relate to Trade and Navigation (London, 1820). On the Portuguese treaties see also
Edgar Prestage, "The treaties of 1642, 1654 and 1661," in Chapters in Anglo-Portuguese
Relations (Watford, 1935), pp. 130-151; and R. Lodge, "The treaties of 1703," in ibid.
Herslet also prints certain important Spanish c6dulas, while there is an extremely interest-
ing collection of Portuguese alvards of privileges to the British communities in Add. MSS,
27,344.
18 M6moire sur des diff6rences de droits, in B.N., Fonds frangais, 10,766, ff. 437-443;
Quelques rdflexions sur diff6rentes branches du commerce, in ibid., ff. 405-412.
19 Lyttleton to Weymouth, June 21, 1769, in S.P.F., Portugal, 89/69.
The balances in favor of Great Britain shown in contemporary

statistics should, indeed, always be increased by allowances for
invisibles such as freight and the product of British financing of
trade with the Indies and Brazil in stores of non-British origin.20
Nevertheless, it was to those clauses of their treaties which
gave British naval vessels free right of entry to Spanish and
Portuguese harbors, and which prevented any effective search of
British property and merchantmen, that the British owed their
ability to establish a smoothly working system that was responsi-
ble for the safe and cheap export to northern Europe of very
considerable quantities of American gold and silver. In some
cases British men-of-war took shipments of bullion from vessels
returning from the Americas, either while such vessels were still
at sea or after they had actually made Cadiz or Lisbon.2' In most
cases, however, merchants who desired to make illicit shipments
notified the British consul, who in turn informed the master or
purser of the first convenient vessel of the Royal Navy. An
officer and men then called at the consular offices or other designa-
ted spot and collected the contraband in small handy packages
which were placed in special slings hidden beneath their jackets.
They returned to their ship usually at night, not so much because
of any real danger as from a vestigial sense of international
propriety.22 British ministers publicly denied that British officers
engaged in such traffic and then immediately issued private
instructions that the same officers should conduct their con-
traband activities quietly and discreetly.23 Such conduct was
rendered the more inexcusable by the fact that it went on even
when the Spanish and Portuguese authorities were willing to issue
export licenses on payment of 2 or 3 per cent of the value to be
exported. So long as strict prohibitions existed "there was a sort
of necessity to engage in and protect fraudulent export ... but
now ... all the specie smuggling which goes on has no other
purpose than to save 3%.' 24 It was in fact sheer revenue
dodging.
20 A fact noted in De Visme to Shelburne, March 28, 1767, in ibid., Spain, 94/175.
21 Masserano to Weymouth, November 29, 1768, in ibid., 94/180.
22 There is a full description of this business in Hay to Shelburne, March 25, 1767, in
ibid., Portugal, 89/63; but cf. Masserano to Weymouth, July 26, 1769, in ibid., Spain,
94/182, and Hardy to Moutray, March 19, 1771, in ibid., 94/186.
23 Shelburne to Hay, April 14, 1767, in ibid., Portugal, 89/63.
24 B6liardi to Praslin, August 5, 1765, in A.A.R., 543, ff. 334-335; cf. Ossun to Choiseul,
January 28, 1765, in ibid., 542, ff. 109-111. It should be said in defence of the merchants
that although the duties were small the regulations, at Cadiz at least, were as lengthy and
II
Altogether the position of the British merchants in Lisbon and
Cadiz seemed particularly fortunate and happy. It was scarcely
surprising that they had often expressed a liking for the system of
flotas and frotas. They admitted that there were disadvantages:
the long lapse of time before their profits returned, severe fluc-
tuations in prices in the Americas, delays that meant the loss of
perishable goods, and the ever present possibility that an entire
fleet might be lost by war or storm. On the other hand, by con-
temporary standards the fleets were well protected and well run,
while some merchants argued that it was easier to calculate the
possible market under a system of fleets than under a system of
single ships, and that fleets had the further advantage that they
made it possible to dispose of considerable quantities of goods at
one time. Moreover, the protagonists of the monopolies argued
that the limitation of trade to a few ports rendered easier the
collection of debts, because defaulters had to return to the stipulat-
ed ports and face prosecution or forego further trading.25 The
fact that British merchants opposed the abolition of the flotas in
1735 and welcomed their restoration in 1754 was therefore not
very surprising.26
What was surprising was that within a decade of 1754 and
immediately following the victorious Peace of Paris of 1763 the
British were acquiescing in and even welcoming the abolition of
the monopolies, were protesting that their treaties had been ren-
dered valueless, and were alleging that the governments of Spain
and Portugal treated them far worse than they did any other
nation. The period from 1759 to 1783 was in fact one which the
British merchants both in Cadiz and Lisbon found most disturbed
and stormy, and the years were to see changes in their practices
and a fundamental alteration in the direction of their interests.
It is interesting to observe that these were the years which saw the
end of many of the traditional economic forms of the Spanish and
Portuguese empires.
It was not surprising that the Spanish government should
look with disfavor upon the contraband trade to La Plata or that
as complicated as only Spaniards could make them (cf. Consul Hardy to Porten, March
12, 1771, in S.P.F., Spain, 94/186, in which the writer says that he was issuing printed
instructions in an endeavor to guide the merchants through the morass).
25 There is an excellent summary of the arguments for fleets against single ships in
Lyttleton to Weymouth, June 21, 1769, in S.P.F., Portugal, 89/69.
26 H. Seej "Isquisse de l'histoire du commerce frangais A Cadiz au XVIII eme siecle,"
Revue de l'histoire moderne, No. 13 (janvier-f6vrier, 1928), pp. 13-31.
it and the Portuguese should be angered by the British use of

warships to commit revenue frauds, and to this extent it was not
unreasonable that they should desire changes which would elimi-
nate such practices. To such negative disapproval was added in
the years under consideration the positive weight of the desire of
two men to restore their respective countries to greatness.
Charles III in Spain and the iMarquis of Pombal in Portugal were
determined to make their nations economically independent and
to create situations in which the profits of the American dominions
would accrue largely if not exclusively to their own nationals.
They both approached economic problems in a legalistic spirit and
each came independently to the conclusion that the source of
British commercial dominance lay in her treaty privileges rather
than in superior capital, financial, and technological resources.
Each therefore tried to rid his country of the British treaties either
by direct action or by unavowed executive abrogation. Each
pursued separate but parallel policies designed to end preferential
tariffs, enforce the right of search, and effectively prevent the
unauthorized export of bullion. The fact that these policies
were pursued separately but contemporaneously led to certain
very natural suspicions of collaboration in the minds of the
British merchants and officials.
Pombal initiated the attack on behalf of Portugal as early as
1755 with the forthright arrest and sentence for bullion-smuggling
of an officer of the British Royal Navy.27 But the British reaction
was forceful, and Pombal had to back water. When further
arrests were attempted the Portuguese officials were thrown into
Lisbon harbor or received broken heads for their pains.28 This
was rough treatment, but there was nothing much that Pombal
could do. He dared not in the last analysis push the British to
war or even as far as a denunciation of their alliances.
Charles III, on the other hand, from 1759 to 1762 pursued a
policy based on the belief that war with the British would enable
him to get rid of the British treaties and, as a consequence,
restore Spanish industry, recapture the Indies trade for the
Spaniards, and extinguish British interlope trade.29 When he
declared war in 1761 he did so in the belief that victory in the war
would enable him to refuse to renew the treaties which were, of
27 Sir R. Lodge, "The English factory at Lisbon," in Prestage, op. cit.; Memorial from
the Board of Trade to the king, March 10, 1767, in S.P.F., Portugal, 89/64.
28 Kinnoul to Pitt, September 8, 1760, in ibid., 89/53; Franklin to same, November 30,
1760, in ibid.
29 Christelow, op. cit.
course, automatically abrogated when the war began ;30 and,

indeed, even when it was fairly clear that the war was lost he
insisted on non-renewal of the commercial treaties as an essential
condition of his willingness to make peace.3' But his insistence
was quite useless, for the war went very badly indeed, and Charles
was left with no alternative but to agree to renewal.
During the war Charles gave serious consideration to schemes
for ending the Cadiz monopoly and for opening the Indies trade
to other Spanish ports. He had in mind in part the fact that the
most valuable of the British fiscal privileges were valid only in
Cadiz. It was true that the treaties gave general promises of
favorable treatment, but local methods of calculation were so
very varied and local imposts in addition to national tariffs so
considerable that the British were nowhere else on so favorable a
footing as they were in Cadiz.32 In 1762 when things were going
very badly Charles and his ministers had peevishly threatened to
transfer the American monopoly from Cadiz to La Corufna and
Ferrol, where seini-autonomous local governments gave British
trade a rather rough time.33 But this was an empty threat, for
the majority of indigenous produce suitable for shipment to the
Indies was produced in southern Spain and, inland transport
being what it was, was best shipped from Cadiz. The latter port
could not be excluded from the Indies trade, but the idea of ending
its monopoly was scheduled for serious post-war discussion.34
But it was not an idea which could be brought to fruition in a day,
for the Cadiz interests continued to offer strong opposition to
commercial reform-as they had done for the past two hundred
years-5
The evidence that Charles continued to plan for a further war
against 13ritain after the conclusion of the Seven Years' War is
irrefutable. But that was a long-range project and in the mean-
time Charles concentrated on the reform of the Indies trade and
on relatively cautious methods of imposing limitations on British
economic activities. He effectively plugged one minor but
30 Ossun to Choiseul, December 8 and 29, 1760, in A.A.P., 530, ff. 292-305 and 394-4
same to same, April 26, 1762, in ibid., 536, ff. 93-99.
al Ossun to Choiseul, June 12, 1762, in ibid., 536, ff. 314-316; same to same, August 1,
1762, in ibid., 537, ff. 6-10.
32 B.N., Fonds frangais, 10,768, f. 108.
33 B6liardi to Praslin, December 6, 1762, in ibid., 10, 7164, ff. 303-304.
3 Same to same, January 31, 1763, in ibid., 10,764, ff. 311-312.
36 Same to MI. de Moras, May 9,1758, in ibid., 10,764, f. 9; same to Praslin December 6,
1762, in ibid., ff. 303-304.
irritating source of British bullion-running by refusing to renew

permits for British mail-boats to call at La Corufia, where before
the war they had met the regular despachos from the Indies to the
nmutual profit of the officers of both sides and to the detriment of
His Catholic Majesty's revenues.36 IHe issued orders for the strict
search of all foreign merchantmen entering Cadiz and attempted
to put an end to British smuggling. His officers even enforced
the orders occasionally--mostly, as it turned out, against non-
British commerce, for until the Spanish crown could pay its
minor officials decent salaries the British were safe. As the
French ambassador put it:
It is true that the English have far less trouble [at Cadiz] than we do
but this is simply the result of the different structure of their trade which
is carried on in vessels of large tonnage and consists of cargoes which are
far too valuable for the master to take any chances with the pettier
forms of contraband; for they will only indulge in contraband if the
likely profits make it worth their while thoroughly to corrupt the
Customs House employees.37
Some contraband, howevei, was seized; and some British naval

officers were arrested for bullion smuggling. Moreover, in 1768
the importation into Spain of certain types of textiles was pro-
hibited-a move which the British merchants strongly resented
because the types were those which were the most popular in
the Indies.38
Ponmbal's approaclh to the similar problem in Portugal was
rather different. His early attempts to put an end to the
unauthorized export of bullion had met with too rough a reception
for him to continue them. The principal weapon of his later
choice was therefore the device of the limited company open only
to Portuguese nationals. In 1756 he had formed the Maranhao
Company which was given a monopoly of the trade with Maran-
hao; and he followed this with the establishment of the Per-
nambuco Company, to which was reserved all trade with Per-
nambuco and Gr(ro Para'. Only Portuguese merchants could be
stock holders, and they were "most powerfully prevailed upon"
to subscribe. Minister Hay thought rightly that lack of skills
and shortage of capital would eventually "make the companies
dron of themselves and allow trade to return into its former
36 Wall to Slipper, April 23, 1763, in S.P.F., Spain, 94/165; Slipper to Egremont, May
18, 1763, in ibid.
17 Ossun to Choiseul, December 17, 1764, in A.A.?X, 541, ff. 286-297.
38 Vera Lee Brown, "Studies in the History of Spain in the Second Half of the Eigbt-
eenth Century," in Smith College Studies in History, XV, Nos. 1-2, pp. 52-56.
channels,"39 but the British merchant community protested

bitterly and said that the formation of the projected Rio and
Baia companies would completely exclude them from any trade
with Brazil via Lisbon. Moreover, their agents in Brazil, who
were also able to engage in further trade only through the new
monopolistic companies, took this as an opportunity to default
on their quite heavy outstanding debts to their former British
suppliers.40
Pombal argued that the setting up of the monopolistic
companies was not an infringement of the treaties, and he blandly
added that in any case the treaties were of no benefit to Portugal.
Even the assistance which she had received in 1762 had been of
value to the British rather than to the Portuguese, because it had
been essential to the British to keep Portugal out of the hands of
the Bourbons.4' Minister Hay reported that Pombal:
seems to lay it down for a maxim, that it is the undoubted interest of
Great Britain to assist Portugal upon every emergency, at the same
time that almost every innovation which he has introduced in the
commerce of Portugal for these past ten years tends evidently to the
lessening of that interest.42
It was a view which was re-echoed in British parliamentary,

ministerial, and mercantile circles, for Pombal's actions every-
where aroused bitter feelings of a most intense nature. His
actions were endangering British commerce of a most valued type:
The clandestine trade carried on ... in the Brazils with the Spanish
colonies, so very advantageous and profitable to this nation, will be
infallibly lost, if their intended companies take effect, who will not
practice those methods by which private traders reap great profits.
Consequently the consumption of British manufactures at Buenos
Aires, and in the Spanish colonies adjoining the Colonia do Sacramento
in the River of Plate, will be considerably lessened and diminished.43
It was a very important background to some later developments.

For the remedv was obvious. If the British could not trade with
39 Hay to Conway, March 1, 1762, in S.P.F., Portugal, 89/62. On Anglo-Portuguese
trade in this period cf. A. K. Manchester, British Preeminence in Brazil. Its Rise and
Decline (Chapel Hill, 1933), chap. ii.
40 Memorials of the British Consul and Factory, pp. 40-90; Memorial from the Board of
Trade to the king, March 10, 1767, in S.P.F., Portugal, 89/64.
41 Hay to Conway, September 12, 1765, in S.P.F., Portugal, 89/60.
42 Same to same, October 9, 1765, in ibid., 89/60.
4t Memorial of the British factory at Lisbon, November 29, 1764, in ibid., 89/59.
Brazil and Buenos Aires via Lisbon they would have to do so via
more direct routes, especially if, as was the case, relations with
Spain were simultaneously deteriorating.
III
Many (though by no means all) of the Spanish and Portuguese
moves were undoubtedly decently proper and easily justifiable
even by present-day international standards. But they were
viewed by the British against a background of intense suspicion
engendered by the belief that the Family Compact of 1761 was
intended for the ruin of British trade and that the Bourbon
powers would go to war again at a convenient moment. New-
castle's private summary of the British grounds for war against
Spain in 1762 had given pride of place to "the contents of the
Pacte de Famille ... which deprives us of the privileges granted
by all our former maritime treaties with Spain,"44 and it was
known that the Family Compact was not abrogated by the Peace
of Paris. Suspicions of its likely consequence therefore naturally
continued in the minds of pamphleteers and politicians alike.
A Review of Lord Bute's Administration foretold that "the French
and Spaniards together will take the most effectual methods ...
to prevent any trade being carried on between ourselves and their
colonies."45 4Malachy Postlethwayt, the author of the celebrated
Commercial Dictionary, thought that this was true, but hoped
that the Spaniards "will remember that the nation which lately
dispossessed them of the Havana is able do to it again."46 A
similar mixture of fear and belligerency was to be found in many
of the pamphleteers over the next fifteen years.47 Others took
alarm at the "commercial spirit which is beginning to prevail in
the Spanish nation" and alleged that the Spaniards were begin-
ning to make competitive inroads against British trade.48
Ministers showed their concern in the instructions which
were given to the Earls of Hertford and Rochford, respectively
appointed ambassadors to the courts of Versailles and Madrid in
1763. The latter's instructions referred to "the unjust coin-
mercial partiality shown to France," ordered him to report im-
44 Add. MSS, 38,334, if. 80-89.
45 (London, 1763), p. 21.
46 See under "Mexico" in the Dictionary.
47 E.g., Short View of the Political Life and Transactions of the Rt. Honourable Com-
moner (London, 1766); Observations on the Late State of the Nation (London, 1769).
48 Reflections on a Domestic Policy Proper to be Observed on the Conclusion of a Peace
(London, 1763), p. 58.
mediately any attacks on British trade or new favors to the

French, and envisaged the possibility of the Spaniards "getting
rid, as soon as they shall find themselves in a condition, of those
obligations (imposed by the Peace of Paris), revenging the dis-
grace of their late ill successes, and recovering what they have
ceded to this Crown."49
Hertford's instructions were very similar.50 At the same time
all British consuls in Spain were instructed to be "most particularly
watchful ... in such cases where any innovation in favor of other
powers, or otherwise prejudicial to H. M. service and the British
commerce, may be attempted to be introduced contrary to our
treaties."5'
It was not a happy atmosphere.
The instructions given to the ambassadors contained a further
significant clause. They were to keep strict watch over the
relations between the courts to which they were accredited and
that of Lisbon. The British saw "the Portuguese, our ancient
friends, locked fast in the embraces of the House of Bourbon,"52
and they were anxious to know whether there was collaboration.
They thought that Pombal deliberately tried to make his relations
with France and Spain appear worse than they really were, and
they were not impressed by his warnings that Britain should
make no moves against Portugal because such moves might mean
the loss of Brazil to the Bourbons.53 The over-all atmosphere of
an anti-British conspiracy was strengthened by the fact that
about the same time the courts of Naples, Versailles, Madrid,
and Lisbon were demanding almost identical new commercial
treaties with Britain and even using almost identical language in
framing their demands.54 These develoDments were pDossiblv of
49 Dated September 20, 1763, in S.P.F., Spain, 94/165.
50 Dated September 29, 1763, in ibid., France, 78/268.
51 Circular to all consuls at Spanish posts, September 20, 1763, in ibid., Spain, 94/165.
52 The Advantages of a Settlement on the Ohio in North America (London, 1763), p. 21.
Cf. A Review of Lord Bute's Administration, p. 21; and Rochford to Shelburne, November
11, 1767, in S.P.F., France, 78/273.
63 Hay to Conway, September 20, 1765, in S.P.F., Portugal, 89/60. Cf. Rochford to
Shelburne, November 11, 1767, in ibid., France, 78/273; same to Conway, March 17, 1766,
in ibid., Spain, 94/173; case of Messrs. Cornell and Morony, in ibid., Portugal, 89/59;
Beliardi to Choiseul, April 15, 1764, in B.N., Fonds frangais, 10,768, ff. 525-526.
54 The full story can be followed in the relevant series of State Papers Foreign in the
Public Record Office. On the French moves see L. Cahen, "Une nouvelle interpretation
du traite franco-anglais de 1786-7," Revue historique, CLXXXV (avril-juin, 1939),
257-287.
independent origin; but they were simultaneous and the Britist

suspected that they were coordinated.
It soon became clear, however, that British officials, no matter
what their suspicions might be, did not demand the mainte-
nance of the Cadiz and Lisbon monopolies in full force or believe
that such monopolies offered the best protection of British inter-
ests. This was illustrated by the comments of Minister Hay on
the Portuguese edict of September, 1765, which ordered that
from the time of the return of the next fleet from Rio de Janeiro, and of
the return hither of that which is now upon the Bay of All Saints, the
commerce with these two Brazilian settlements is no longer to be
carried on by the frotas, and that anybody is to be allowed to send single
ships at leisure.55
Hay went on to say that he thought the move would benefit all
concerned, and added that he had offered sincere congratulations
to Pombal:
I could not help telling him that Freedom was the Soul of Commerce,
therefore every liberty which could be allowed must be beneficial to the
trade and credit of the nation.
Many of the British merchants did not share his point of

view. They argued that so far as they were concerned the
step was meaningless as long as they must continue to do business
under the shadow of the monopolistic companies, and they
howled dolefully that the new move was merely a further stage
in their complete ruination.56
The similar Spanish edict of October 14, 1765, which freed the
Indies trade from some of the fiscal burdens previously imposed
upon it and opened the trade of the Spanish West Inidies (but not
of the Main) to seven other Spanish ports as well as Cadiz, met
with like British official approval, even though it clearly meant
the approaching end of all aspects of the Cadiz monopoly.57
Ambassador Rochford wrote:
55 Hay to Conway, September 21, 1765, in S.P.F., Portugal, 89/60.
56 Same to same, October 8, 1765, in ibid., 89/60.
57 Copies in A.A.E., 544, ff. 177-180; and in S.P.F., Spain, 94/172. Beliardi, however,
thought it a timid measure and expressed the view that it would make little difference to
anybody. The islands trade was a minor part of the whole, while ports other then Cadiz
lacked both capital and experience (Be1iardi to Praslin, February 17, 1766, in A.A.E.,
545, ff. 107-108; same to same, October 7, 1765, and two letters of February 17, 1766, in B.
N., Fonds frangais, 10,767, ff. 398-399, 427-429.
Inclosed I send you a new edict just published here, by which you
will see that a free commerce to the Spanish islands in the West Indies
is now opened to H. C. M.'s. trading subjects and which will certainly be
of very great advantage, to them. They begin first with the islands in
order to see how they will succeed. If it does it is intended to extend
the permission to the South American continent. I should think this
will be of advantage to us, as there will certainly be a greater call for
our goods by the Spanish merchants here, now that they have a free
liberty of exporting them.58
One or two of the British merchants in Cadiz commented in the

mood of Cassandra that "the making of alterations in the long
established system of commerce is, as experience shows, a matter
of great delicacy and danger,"59 but, on the whole, even the
commercial community approved the new measure.
The British Board of Trade made it clear that it shared the
views of its diplomatic representatives and that it approved of the
new edicts. To some extent this attitude may have been due to
that sympathy for freer trade which was on the increase in the
decade preceding the publication of The Wealth of Nations. But
why did such sympathy exist? In part, perhaps, in the particular
instances at least, it was the result of surveys such as those which
the board ordered to be made of British trade in Spain and
Portugal because of its fears of undue French competition and
also as a result of the numerous complaints of decay of trade
which it received during the primary post-war depression of
1764-1766. The returns from the surveys were interesting, for
they showed that the traditional commercial organization of
national factories enjoying exclusive treaty privileges and acting
as salesmen and agents for their national products was already
moribund. The paniphleteers and statesmen of 1761 and 1762
who had attached such importance to that organization were
merely repeating parrot-wise the facts of an earlier age which
were no longer a reflection of reality. Rochford reported in
1764 that the Cadiz factory was greatly decayed, and it is doubt-
ful whether it had more than a score of members at any time
during the next twenty years.60 In Madrid there had been no
58 Rochford to Conway, October 28, 1765, in S.P.F., Spain, 94/172.
59 Porten to same, November 5, 1765, in ibid.
60 Rochford to Halifax, November 22,1764, in ibid., 94/168. Cf. same to same, January
30, 1764, in ibid., 94/166; and Hardy to Porten, November 12, 1765, in ibid., 94/169.
Factory memorials from 1763 to 1778 show a very limited range of signatures. In part,
however, the decline in numbers was due to a Spanish edict of 1762 which compelled all
British merchants for a number of years and there were very few
elsewhere in Spain.61
Returns from Portugal showed considerable British communi-
ties in Lisbon and Oporto, and a British investment in vineyards,
warehouses, inventories, etc., in excess of ?1,000,000. Lisbon was
a far livelier port than Cadiz, it was visited by a greater number of
British vessels, and arrivals from and departures for the Americas
were far more frequent.62 Nevertheless, Minister Hay felt that
the old days were over. He reported that merchants often
grumbled at the long-term credit involved in trading with Brazil
via Lisbon, and he said that they were increasingly disposed to
make spot or short term credit sales in Lisbon, thereby sacrificing
larger potential profits for quicker returns.63 Moreover, when
Minister Lyttleton and the Board of Trade made a detailed study
of the Anglo-Portuguese balance of payments over a number of
years they came to the conclusion that the gross volume as well
as the balance favorable to Britain of Anglo-Portuguese trade had
been greatly exaggerated in the popular mind.64 The rate of
profit was none too good in the light of the capital involved. Yet
the Lisbon trade was still the more treasured, because on the
average it produced a favorable balance twice the size of that
derived from the Spanish trade.65
IV
What conclusions were to be drawn from this? It certainly
did not mean that there had been any diminution of British
interest in securing gold and silver from the Americas or in Brazil
and the Indies as vents for manufactures. British merchants
continued to react strongly against any attempts to stop their
the Irish refugees in Spain to opt either for Spanish or British citizenship, most of them
choosing the former. But the Irish had been very small fry in Spain.
61 Porten to Halifax, February 11, 1765, in ibid., 94/169.
62 Based on scattered statistics in the State Papers Foreign, Public Record Office. The
most satisfactory of the documents is a complete list of arrivals in and departures from the
port of Lisbon, 1765-1768, in Lyttleton to Weymouth, March 13, 1769, in S.P.F., Portugal,
89/67. Reports from Lisbon show a total of 249 arrivals from Brazil in the four years
1765 through 1768, while possibly incomplete reports from Cadiz, 1765 through 1770, show
only thirty-five arrivals from the Indies.
63 Hay to Halifax, December 7, 1764, in S.P.F., Portugal, 89/59.
64 Lyttleton to Weymouth, January 14, 1769, in ibid., 89/67; state of the exports to and
from Portugal, Christmas, 1750, to Christmas, 1765, in ibid., 89/64.
65 Ibid. There is a similar statement covering the Anglo-Spanish balance of payments,
1750-1765, in S.P.F., Spain, 94/177; while one in Add. MSS, 38,345,ff. 218-219, gives the
figures for 1766-1776.
bullion smuggling, and they were agreed that they could permit
neither the Spaniards nor the Portuguese to stop British trade
with La Plata and Chile via Brazil.66 Consul-General Porten
thought that all that the survey showed in the case of Spain
was that British goods did not need British subjects in Spain
to sell them, for there had been no decline in the level of sales.67
He was of the opinion that merchants were changing their
methods and had become convinced that it was better to have
a debtor in Cadiz whose assets could be seized than a debtor
in Veracruz whose assets were in practice often untouchable.
Joseph Salvador,68 when questioned as to the alleged decline in
British participation in the Cadiz-Indies trade, replied that "I
am apt to believe that the British merchant trades less on his
own account." But he hastened to add:
there are not less British manufactures that go by way of Old Spain
consumed in America in times of peace than were formerly, but my
opinion hereon is only conjectural. I don't know how to prove it. The
French trade has increased, tho' of late it has been much hurt by the
German; the increase of ours has been answered by the interloping
branch; were it lessened, it would increase without doubt the other
wayA69
It is also possible that the British, like the French, were growing
very dissatisfied with the "cover-men" who increasingly were
being found dishonest and unreliable.70
The most important fact, however, was that some of the
British were beginning to realize that the competitive advantages
of superior skills, resources, and practices should be rated superior
to those accruing from exclusive comnmercial treaties; and they
were beginning to be convinced that they possessed the former.
Beliardi, the French consul-general, hopefully negotiated a new
Franco-Spanish commercial treaty, but he was careful to point
out that no treaty, however generous its terms, could alone enable
the French to oust the British from the Indies trade. If the
French were to regain that trade they must make regular market
studies just as the British did. They must observe carefully the
66 Rochford to Conway, October 24, 1765, in S.P.F., Spain, 94/172.
67 Porten to Halifax, February 11, 1765, in ibid., 94/169.
68 On whom see Christelow, "Contraband Trade between Jamaica and the Spanish
Main, and the Free Port Act of 1766," THE HISPANIC AMERICAN HISTORICAL REVIEW,
XXII, No. 2 (May, 1942), 329-331.
69 Add. MSS, 38,373, ff. 130-131.
70 Puyabry to Praslin, August 24, 1764, in A.N., B 1, 277.
rigid British packing specifications for the Indies trade-no bale

larger than could be transported by mule, precautions against
damp and rough handling, textiles in standard lengths, products
identified by familiar gaudy labels and well-known simple marks.
The French merchant must also bring himself to acknowledge
that British manufactures sold on past reputation and maintained
quality."7 Thus British textiles were even in texture and fast in
color, and every effort was made to keep standards high. Over
the past thirty years comparable French goods had seriously
deteriorated in quality, so much so that the Cadiz house of Behic
fils, one of the principal French firms engaged in the Indies trade,
reported that "the quality of our cloths used to be so good the
Spaniards would buy all we could produce, sight unseen; but now
a merchant must inspect every single yard, if he is not to be
cheated."72 Consequently certain types could no longer be sold
on the flotas. Furthermore, French merchants over-emphasized
the conservatism of the Indies market for, although it was true
that certain staple lines were best left unclhanged, in other cases
variety was demanded; and the British were careful to cater to
this desire. Often they produced new patterns especially for the
Indies trade. Where accepted French patterns and trademarks
held the market the British duplicated the one and forged the
other.73 And the more intelligent of the British were consciously
aware that they possessed such advantages.74
Financially, too, the British were superior to their competitors.
Their credit resources were greater, and they did not engage in
those fraudulent bankruptcies which so damaged the reputation
of the French.75 Their drafts were acceptable, and their banks
reliable. The French made a brief attempt to take away from
the British their quasi-monopoly of the licit and illicit export
of bullion from Cadiz, but they finally admitted that the British
service was so based on known and accepted financial and re-
71 R6ponse au m6moire que M. de Brou a adress6 A M. le duc de Choiseul, 5 juin, 1
in B.N., Fonds frangais, 10,768, ff. 160-166; B6liardi to Choiseul, December 15, 1766, in
A.A.R., 547, ff. 445-447.
72 Behic fils to Ossun, January 14, 1769, in B.N., Fonds frangais, 10,764, if. 435-438.
73 M6moire sur le commerce pour le Mquis. d'Ossun, March 16, 1761, and January 4,
1762, in A.A.R., 531, ff. 364-485, and 535, ff. 3-8; Quelques r6flexions sur diff6rentes
branches du commerce de la France et de l'Espagne, in B.N., Fonds frangais, 10,768, ff.
152-157; Produit pour la France de ses importations de toileries A Cadiz, in ibid., 10,768, ff.
215-243; M6moire pour servir de reforme au commerce, in ibid., 10,768, if. 372-384.
74 Consul Beawes' report of September 13, 1766, in S.P.F., Spain, 94/171.
75 M6moire pour servir de r6forme au commerce, in B.N., Fonds frangais, 10,768, f. 381.
mittance facilities and so efficiently organized that they could not

compete.76 In addition to the attraction of reliable banking
facilities the fighting ability of the British warships, in days when
Barbary pirates were still active, offered a remarkably cheap form
of insurance of which the French and Dutch nmerchants and even
the Spanish government regularly took advantage.77
There were, moreover, other things which were becoming clear.
Trade with the Indies via Cadiz had always been a business which
featured slow returns and heavy risks with alarmingly frequent
bankruptcies. By the standards of the 1760's, unstable pyramids
of credit with their base in Manchester or London, their inter-
mediate layers in Cadiz and Veracruz or Lisbon and Rio, and their
peak in some remote Indian village, were no longer acceptable.
The British wanted quicker returns than those with which their
fathers had been content, they wanted their capital tied up for
shorter periods, and there were definite indications of attempts to
reduce the credit they offered from eighteen to twelve and even
to nine months,78 a phenomenon which was also noted in their
trading with the British colonies in North America.
The justified belief of British merchants in the superiority
both of their goods and of their financial resources, together with
their desire for quicker returns and shorter credit, would appear to
have led them to certain conclusions. Clearly such considerations
should lead to a preference for sales in Cadiz rather than direct
investmient in the flotas. On the other hand, the standard mark-
up of prices in the Indies and Brazil was between 23 and 30 per
cent, as compared with 7 to 10 per cent for Cadiz and Lisbon, and
10 to 15 per cent for other parts of Spain and Portugal.79 The
problem was how to combine a share of these higher profits with
shorter credit.
An obvious solution would be for the British to trade directly
with Spanish and Portuguese America, for this would eliminate
the delays and expenses inherent in trading via Lisbon and Cadiz
and should mean more rapid returns, provided that the colonial
76 Ossun to Choiseul, January 14, 1765, in A.A.?X, 542, ff. 47-53; B6liardi to Praslin,
August 24, 1767, in B.N., Fonds frangais, 10,765, ff. 1-3; Puyabry to same, May 4, 1769,
in A.N., B 1, 278.
77 Rochford to Halifax, October 27, 1764, in S.P.F., Spain, 94/168; Collier to Sandwich,
June 16, 1771, in ibid., 94/187. The standard charge appears to have been only 2 per
cent of the value carried.
78 Cf. Hay to Halifax, December 7, 1764, in S.P.F., Portugal, 89/59.
7 Ossun to Choiseul, January 30, 1766, in A.A.R., 545, fF. 79-81; Lyttleton to Wey-
mouth, January 14, 1769, in S.P.F., Portugal, 89/67.
merchant was himself able to pay on cash or short credit terms,

and was not wholly dependent on long credit advanced by Cadiz
or Lisbon. There was evidence that the colonials were in fact not
dependent on credit advanced by the merchants of the mother
countries and were independently able to offer attractive terms.
Trading with them during the British occupation of Habana in
1762 had been lively and profitable, while for many years after the
Peace of Paris the British received attractive offers to open trade
with merchants in Guatemala, Hispaniola, and other Spanish
colonies on a cash basis.80 Moreover, in 1764 the French am-
bassador reported on the situation in Peru as follows:
Ever since the trade with Peru via Cape Horn was authorised, the
Peruvian merchants have made repeated efforts to monopolize it and to
exclude European Spaniards. Consequently they send considerable
sums of money to Spain to be used for the purchase of merchandise on
their own account, and many of the merchants concerned even come to
Europe to make their own purchase.81
He thought that direct trade with such merchants without the

intervention of any intermediaries would certainly suit both the
Americans and the British. He added that from the purely
Spanish point of view the objections were obvious:
If the Viceroyalty of Peru can procure all that it needs from Europe
directly and without the assistance of European Spaniards, if the goods
which Peruvian merchants in their turn send to Europe go solely on
their own account and to their profit, then all the advantages of this
commerce will go to the Peruvians and they wvill become increasingly
powerful and independent.
The warning was justified. The commercial logic of the situation

undoubtedly called for direct dealings between the British and
colonial merchants and, given the economic and political philos-
ophy of the age, such a situation held an undeniable inherent
threat to Portuguese and Spanish sovereignty in America.
80 Maud to Lyttleton, October 7, 1765, Public Record Office, Colonial Office Papers,
137/34; Forrest to Stephens, June 12, 1770, in ibid., 137/65; and Tonyn to same, July 30,
1770, in S.P.F., 94/185, forwarding offers to trade from merchants of Guatemala and from
"some of the most considerable merchants of Cartagena de las Indias" (Cf. Christelow,
"Contraband trade between Jamaica and the Spanish Main, and the Free Port Act of
1766," loc. cit.).
81 Ossun to Grimaldi, August 6, 1764, in A.A.?L, 541, ff. 6-12; cf. B6liardi to Choiseul,
n.d., in ibid., ff. 183-185; Puyabry to Praslin, August 24, 1764, in A.N., B 1, 277.
The implications of the long-term situation were therefore

serious. The immediate situation was exacerbated by the fact
that the British were aware that the French and the Spaniards
were conducting secret negotiations. It was "this dangerous
system of the two courts which makes everybody suspicious"82
aind which led to various rumors (mostly incorrect) such as the
one to the effect that Spain was planning to cede to France
"some island in the Gulph of Darien, or some territory in the
Isthmus of Panama, together with some privileges in trade with
the other Spanish colonies in America."83
The British ambassadors in both Paris and Madrid agreed that
the Bourbon powers were determined "to prejudice our trade as
much as possible . . . in all such goods as are destined for Spain
and her possessions."84 On top of this, as a further exacerbant,
came the intense dissatisfaction produced by the state of economic
relationships with Portugal. The Board of Trade in a memorial
to the king attacked the Portuguese in exceptionally strong
terms85-and it was an indication of the importance attached to
the question that the board should see fit to bring it so formally to
the attention of the sovereign. For their part, the Spaniards were
gloomily certain that the British parliament was preparing "to
support mercantile combinations in the most unwarrantable
enterprises." 86
There was one other sphere of potentially serious controversy.
The period was one of accelerated development of trade between
Europe and the Orient; and the British, French, Dutch, and
Spaniards were all beginning to appreciate the vast markets and
the great potential profits which were to be found in China and
other oriental countries. In one of his memoranda Beliardi said
that American gold and silver were principally important because
an effective monopoly of them would mean an equally effective
monopoly of the China trade,87 and it is certain that the coin-
82 De Visme to Shelburne, November 3, 1766, in S.P.F., Spain, 94/175.
83 Halifax to Rochford, February 12, 1765, in ibid., 94/169; same to Hertford, February
12, 1765, in ibid., France, 78/265.
84 Rochford to Conway, September 6, 1765, in ibid., Spain, 94/167; same to Shelburne,
June 7, 1767, in ibid., France, 78/272; Hertford to Halifax, February 21, 1765, in ibid.,
78/265.
86 Board of Trade to the king, March 10, 1767, in ibid., Portugal, 89/64.
86 Gray to Shelburne, August 7, 1768, in ibid., Spain, 94/180, giving an account of an
interview with Grimaldi.
87 M6moire sur les avantages que le Pacte de famille peut donner A la France et A
l'Espagne, in B.N., Fonds frangais, 10,767, f. 241. Cf. The Wealth of Nations, Book I,
Chap. xi, Pt. iii.
mitments and interests of the East India Company were one of

the major reasons why the British could tolerate no interruption
in their receipts of American precious metals. It is interesting to
note that the first draft of the British instructions88 to Admiral
Draper for the campaign against Manila in 1762 had called for the
capture and retention of a base in the Philippines for use for the
development of trade with Canton.
It was not surprising, therefore, that the British greatly dis-
liked Spanish plans for the abolition of the trade between Acapul-
co and Manila and the substitution of direct trade between Cadiz
and Manila via Cape Horn. Grimaldi said that "he wished
nothing so much as to destroy the ruinous trade to Acapulco,"89
for his advisers calculated that the freight on oriental produce
shipped to Spain via the Horn would be only 25 per cent of that on
similar goods transhipped via Panama. 90 In July, 1767, the first
ship from Manila arrived in Cadiz, and its backers were able pro-
fitably to sell its cargo of cinnamon at prices which were only 65
per cent of those the British and the Dutch had been charging.'
The British had never relished the idea of such direct trade, and
they certainly did not like its first practical manifestations. They
therefore instructed their ambassador to inform the Spanish
government that Britain considered direct trade between Spain
and the Orient to be excluded by the terms of past treaties. If
this argument was not accepted:
then the restrictions laid upon England and Holland by those treaties in
regard to trade in Spanish America must, of course, cease, as they were
originally a compensation for the exclusion of Spain and her dominions
in general from the commerce of the East Indies except in the limited
manner in which it has been carried on.92
The hint was plain.

V
The time had not yet been reached, however, when commercial
considerations would heavily outweigh political. The danger
inherent in the situation under analysis lay in the fact that
political and commercial desiderata were tempor arily united.
88 Bodleian Library, North MSS, B 6, ff. 31-32.
89 De Visme to Richmond, June 18, 1766, in S.P.F., Spain, 94/174.
90 B6liardi to Choiseul, February 24, 1766, in A.A.E., 545, ff. 136-139; Ossun to same,
August 11, 1766, in ibid., 546, ff. 324-329.
9' Extracts from merchants' letters to London and Amsterdam, July 21 and 24, 1767,
in S.P.F., Spain, 94/179.
82 Shelburne to Gray, August 16, 1768, in ibid., 94/180.
There had been a great weakening in the interests of the Britisl

houses trading with the Indies via Cadiz which for many decades
had acted as a brake on other Britons who argued that more was
to be gained by making war upon Spain and depriving her of the
Indies; and, in addition, traders with the Americas via Lisbon
saw themselves increasingly excluded from the Lisboni-Americas
trade. The fear of actions which might provoke the Bourbons to
undertake an invasion of Portugal no longer held the restraining
power it had once possessed. Statesmen and merchants were
going in the same direction. It was clear from instructions given
to the British ministers in Madrid and Lisbon that the British
government was beginning to contemplate and prepare for the
possibility of war in both Spanish and Portuguese America.
Thus Sir James Gray, who left England as minister to Spain in
July, 1767, was instructed to:
apply yourself with diligence to procure the most exact information
concerning the strength and weakness of the Spanish dominions in
South America, the truth and amount of the discontent which are sup-
posed to prevail there, the nature and degree of the dependence of those
provinces on Old Spain, the state of the military and fortifications, the
points which may be supposed to be most open to attack, and the in-
clinations which may be expected to be found in such provinces in such
cases. You will, likewise, procure any maps or charts of those prov-
inces, either manuscript or printed, together with plans of their towns
and fortifications, which you will transmit to us together with your
opinion how far each is to be depended upon.93
The British minister in Portugal had already received most

secret instructions in similar terms and had been requested to
forward like information in respect to Brazil and Portugal.94
Old ally and recent enemy were apparently to be considered on
the same footing.
Evidence of execution of such orders in the case of Brazil is
lacking, but so far as the Spanish Empire was concerned some
effort was made to put the instructions into effect. The French
heard reports that British survey parties had been captured on
the coast of Panama and off Caracas,95 and alleged British spies
were brought from the Indies to Ferrol with the maps which they
h] mrndp 96 It lnoked as thoiuh the British:
93S.P.F., Spain, 94/177. 94 Ibid., Portugal, 89/60.
95 B6liardi to Choiseul, March 7, 176S, in B.N., Fonds frangais, 10,765, f
96 Same to Praslin, January 21, 1769, in A.A.E., 553, ff. 62-65. These were
spies who escaped to Oporto and delivered their maps to the British consu
mouth, December 8, 1770, in S.P.F., Portugal, 89/70).
intended to fix four or five points on both coasts of Spanish America and
to use these points as bases from -which to cut off all communications and
intercept all commerce between Spain and her possessions and to ap-
propriate the latter by a lucrative method which will cost her very
little. 97
Moreover, according to one account, Secretary of State Lord

Shelburne agreed to support a revolution in Mexico, to establish
British sovereignty over Veracruz and San Juan de Ulloa, and to
encourage similar revolts in Chile and Peru.98 Whatever the
accuracy of this story, it was certainly true that the British heard
the reports of disturbances in Quito and Mexico City with very
great interest.99 As regards Brazil, the French argued that the
British were so soured by their recent experiences that they were
unlikely to be willing to undertake the expense of defending
Portugal against a second Bourbon attack. They would prob-
ably confine themselves, therefore, to ensuring that Brazil
secured virtual independence, which would mean that she would
enjoy direct economic relationships with Britain.100 They told
Pombal that the British establishments in the Falklands were "so
many traps" to ensure that "the Spaniards and the Portuguese
should have possessions in the New World only on a precarious
basis, and that the British themselves should have all the profit of
the most lucrative Spanish and Portuguese trade."101
The Falkland Islands crisis was a very natural climax to such
developments. The British knew that the Spaniards would view
any settlement in those islands as a threat to the security of their
dominions on the mainland, for the Spaniards had made this
clear as long ago as 1749.102 Such opposition was strengthened by
awakening Spanish interest in the China trade and by the dem-
onstrated profitableness of direct trade between Spain and the
west coast of South America.103 They considered the Falklands
97See above, n. 95.
98 State of the Services of the Marquis d'Aubarede (London, 1771).
99 Rochford to Halifax, July 8, 1765, in S.P.F., Spain, 94/171; Ossun to Choiseul,
November 26, 1765, in A.A.E., 544, if. 352-354; same to same, January 27, 1776, in ibid.,
545, ff. 68-70; Beliardi to same, February 24, 1766, in ibid., 545, if. 133-135.
100 M6moire des questions pr6alables a r6soudre entre les deux cours avant d'arr6ter
definitivement un projet sur la guerre de Portugal, January 20, 1770, in B.N., Fonds
franqais, 10,770.
101 Instructions for Chevalier de Clermont d'Amboise, August 7, 1768, in Instructions,
Portugal, Memoires et documents, A.A.?L, 1, f. 282.
102 R. Pares, War and Trade in the West Indies (Oxford, 1936), pp. 106-107, 528; Julius
Goebel, Jr., The Struggle for the Falkland Islands (New Haven, 1927), chap. iv.
103 Ossun to Choiseul, June 30, 1766, in A.A.:., 536, ff. 148-152.
to be "the key to the South Seas," of no value in themselves, but

of great importance as "a watering station for vessels going to
China and the East Indies, and for service as a depot for merchan-
dise which it might be desired to introduce as contraband into
the domains of His Catholic Majesty."104 Bougaineville informed
the Spanish ministers that Anson on his return from his voyage
around the world had attributed his failure to make a richer haul
of Spanish prizes on the Pacific coast to the lack of a good base
near the Straits of Magellan where his vessels could refit without
the danger of warnings being sent overland to Lima and Santiago
-as was the case if one refitted in Brazil.105
The Spaniards thus believed that the British were interested
in the Falklands as a British-controlled station on the sea road to
China and the Far East, which would at the same time serve as a
base for descents upon the Spanish settlements in time of war and
for illicit trade with them in time of peace;106 and there could be
little doubt that this was the case. Furthermore, the islands
would be particularly useful in the event that the flow of goods to
La Plata via Lisbon and Brazil was interrupted, while politically
the crisis offered the British government a convenient opportunity
to endeavor to break the Bourbon alliance and its implicit threat
to British security. The dispute over the British settlement at
Port Egmont and its destruction by the Spaniards was in fact
settled without recourse to war, but this was almost entirely due
to the fact that the French were unprepared for hostilities at that
time. Everyone recognized that a solution of the fundamental
problems involved had not been reached but had merely been
postponed.
VI
The Franco-Spanish alliance had been shaken but was not

completely smashed, and the allies continued, rather ineffectively,
to prepare for war. 'When Lord Grantham was sent to Madrid as
ambassador in 1771 his instructions were none too different from
those given to Gray, and he was informed that the protection and
expansion of British commerce would be "the principal object of
his attention."'107 The Spaniards continued their attempts to
limit bullion smuggling. They kept a very close watch on British
men-of-war and they forebade Spaniards who were known to be
104 Same to same, September 10, 1764, in ibid., 541, ff. 80-84.
105 Memoire sur les Iles Malouines, in ibid., 546, ff. 341-346.
106 Ossun to Choiseul, April 28, 1766, in ibid., 545, f. 332.
107 May 23, 1771, in S.P.F., Spain, 94/187.
involved in the traffic to approach within fifteen miles of Cadiz.108

They also issued instructions that no merchandise of foreign
origin was to be shipped to the Indies,109 and that returns con-
signed to known "cover-men" were to be seized and confiscated.110
It was significant that these latter measures evoked a far greater
outcry from the French than they did from the British,"1' who
continued busily to develop illicit trade with Spanish America
through direct routes.
The revolt of the Thirteen Colonies against Britain meant an
interruption in the development of the trends we have been
describing. Indeed, one of the reasons why the French gave
assistance to the rebel colonists was that they hoped the rebellion
would halt developments favorable to the British in Spanish
America and enable French merchants to recover their old
supremiacy in the Indies trade.112 This was coupled with the fear
that if the rebels gave up the fight it would merely be in order to
unite with the British in attacks on Hispanic America.1"3 Even
the Portuguese, although Pombal was dismissed in 1777, took the
opportunity to break the ancient alliance and to unite against
Britain in the Armed Neutrality of 1780.
But the interruption was a temporary one. As soon as the
independence of the United States was recognized, the Spanish
government began to receive reports that the British were once
more sending out spies, stirring up disaffection, and landing rifles
in Spanish America.114 The Nootka Sound incident and the first
British negotiations with Miranda were very reminiscent of earlier
episodes, and the repetition was not accidental. It was a token of
something which could not be gainsaid. The attacks of Charles
III and Pombal upon the commercial treaties were mistaken to
the extent that they were based upon faulty diagnoses of the
sources of British commercial predominance, which rested upon
superior technical and financial resources far more than it did
upon treaty privileges. British traders with Hispanic America
108 Add. MSS, 38,341, ff. 181-184.
109 Brown, op. cit., 58-59.
11 Ossun to Grimaldi, April 26, 1771, in B.N., Fonds frangais, 10, 765, ff. 210-211.
111 B6liardi to Boynes, May 6, 1771, in ibid., 10,765, ff. 208-209; Grantham to Rochford,
March 9, 1772, in S.P.F., Spain, 94/189.
112 B.N., Manuscripts frangais, nouvelles acquisitions, 9,435, ff. 367-370.
113 C. H. Van Tyne, "French Aid Before the Alliance of 1778," American Historical
Review, XXXI (October, 1925), pp. ,20-40.
114 GAlvez to the viceroy of Buenos Aires, December 1 and 20, 1783, in Add. MSS,
32,606, ff. 18-19, 20.
certainly included all types-conservative and downright obscur-

antist as well as progressive. Nevertheless, in general it was true
that British merchants had outgrown the old system of limited
fleets and restricted monopolies more speedily than had other
merchants. Thus the blows of the Spanish government against
the old system always told more heavily against their friends the
French than against their potential enemies the British, and it was
always the former, who were financially and industrially the more
backward, who protested the more loudly. So far as the British
were concerned the systemii of commerce based on exclusive com-
mercial treaties and on the Acts of Trade and Navigation had
served them well for nearly a century, but it was now falling
rather rapidly into desuetude. The one-time great interest in the
limited fleets from Cadiz and Lisbon, which had for so long acted
as a check upon the British interlopers and upon the advocates of
direct trade, was largely gone; and the reforms of 1765 and 1778
were alike greeted with approval.
The Spanish, Portuguese, and Neapolitan attacks upon the
treaties were important, because, coming together, they served to
increase the intransigence of the British towards Spain in partic-
ular and to persuade them to undertake factual reviews of the
nature and value of their trade with Spain and Portugal. In
general, although the attacks raised a certain amount of im-
mediate dust and indignation, they merely served to call in ques-
tion the value of such agreements to Great Britain. They still
had some residual value, and the British obtained the renewal of
their Spanish treaties in 1783; but they were worth no sacrifices.
By 1783, indeed, their treaties were no longer exclusive, for the
Franco-Spanish treaty of 1768 and the Franco-Portuguese treaty
of 1783 theoretically, at least, placed the French on a footing of
near equality with the British in both countries. 'rhe British,
however, knew that in spite of any action the Spanish and Por-
tuguese governments might take and notwithstanding French
treaties British manufactures "would not want.,a vent as they
would clandestinely find their way to the coasts of America."1"5
But beyond this it was clear that the need for shorter credits
and larger markets was driving British merchants rapidly towards
a demand for the freeing of Spanish American and Brazilian trade
from all restraints imposed by the mother countries. Economic
and business conditions in general had reached a stage of develop-
ment which meant that many aspects of the Spanish and Portu-
U5 Grantham to Rochford, February 13, 1772, in S.P.F., Spain, 94/189.
guese treaties, and, indeed, of the Acts of Trade and Navigation,

were just as insupportable and just as out of date for the mer-
chants and manufacturers of Bristol and London as they were for
the colonial merchants of New York and Boston."'6 Temporary
interruptions might delay but could not wholly halt the logical
conclusion of such demands. Perhaps the American and French
revolutions postponed rather than accelerated the achievement of
at least economic independence in Hispanic America.
ALLAN CHRISTELOW.
The United Kingdom Treasury Delegation,
Washington, D. C.
"' Cf. Harry Bernstein, Origins of Inter-American Interest, 1700-1812 (Philadelphia,

1 945).

Great Britain and The Trades From Cadiz and Lisbon To Spanish Americ and Brazil, 1759-1783

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Great Britain and The Trades From Cadiz and Lisbon To Spanish Americ and Brazil, 1759-1783

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Great Britain and the Trades from Cadiz and Lisbon to Spanish America and Brazil, 1759-

In this paper I propose to discuss British interest in trade

The peculiar characteristics of the Hapsburg organization of

almost every flota that sailed, and, as a necessary corollary, drew

French and British sources agree that it was easy to over-estimate

A little later the Portuguese agreed that British factors might

found in any one of several places. There was an efficient in-

a trade commenced between the Portuguese and the Spaniards on the

Minister Hay confirmed the value of the returns, for in June

tuguese.'6 The majority of the clauses of these treaties"7 merely

The balances in favor of Great Britain shown in contemporary

it and the Portuguese should be angered by the British use of

course, automatically abrogated when the war began ;30 and,

irritating source of British bullion-running by refusing to renew

Some contraband, howevei, was seized; and some British naval

channels,"39 but the British merchant community protested

It was a view which was re-echoed in British parliamentary,

It was a very important background to some later developments.

mediately any attacks on British trade or new favors to the

independent origin; but they were simultaneous and the Britist

Many of the British merchants did not share his point of

One or two of the British merchants in Cadiz commented in the

rigid British packing specifications for the Indies trade-no bale

mittance facilities and so efficiently organized that they could not

merchant was himself able to pay on cash or short credit terms,

He thought that direct trade with such merchants without the

The warning was justified. The commercial logic of the situation

The implications of the long-term situation were therefore

mitments and interests of the East India Company were one of

The hint was plain.

There had been a great weakening in the interests of the Britisl

The British minister in Portugal had already received most

Moreover, according to one account, Secretary of State Lord

to be "the key to the South Seas," of no value in themselves, but

The Franco-Spanish alliance had been shaken but was not

involved in the traffic to approach within fifteen miles of Cadiz.108

certainly included all types-conservative and downright obscur-

guese treaties, and, indeed, of the Acts of Trade and Navigation,

"' Cf. Harry Bernstein, Origins of Inter-American Interest, 1700-1812 (Philadelphia,

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